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Cerner (CERN) to Report Q4 Earnings: What's in the Cards?

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Cerner Corporation’s CERN fourth-quarter 2019 results are scheduled to release on Feb 4, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 1.5%. Further, it has an average four-quarter positive surprise of 1.2%.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 74 cents, suggesting an improvement of 17.5% from the year-ago quarter. The same for revenues is pegged at $1.43 billion, indicating growth of 5% from the year-ago reported figure.

Factors to Influence Q4

Cerner’s fourth-quarter top line is expected to reflect an improvement in revenues across professional and managed services segments, and licensed software business line. Notably, the company expects revenues to range between $1.41 billion and $1.46 billion in the fourth quarter. The mid-point of this range reflects growth of 5% from the year-ago quarter.

Cerner Corporation Price and EPS Surprise


Cerner Corporation Price and EPS Surprise

Cerner Corporation price-eps-surprise | Cerner Corporation Quote

Given the structural and process changes that are being made by the company, Cerner has become more focused and efficient, which in turn is likely to have improved predictability and profitability. In fact, adjusted earnings per share are expected in the band of 73-75 cents in the fourth quarter. The mid-point of this range is 17% higher than the year-ago quarter.

Further, strong contributions from the key areas, namely Population Health, Revenue Cycle and IT Works are anticipated to get reflected in the company’s overall performance. Moreover, better-than-expected non-U.S. revenues are likely to have impacted the to-be-reported quarter’s performance.

During third-quarter 2019, the company announced an investment and partnership with i2i Systems. i2i holds 25% market share within the federally qualified health centers segment, which covers nearly a third of all Medicaid patient data and has a strong payer business with 13 managed care clients. Consequently, the positive impact of the partnership is likely to get reflected in the fourth-quarter performance.

Moreover, better-than-expected revenue mix and estimated benefit from the initial impact of the company’s operational improvement efforts has kept Cerner on track to deliver its target of 20% adjusted operating margin in fourth-quarter 2019.

However, the company is likely to have experienced a decline in gross margin in the to-be-reported quarter owing to somewhat higher mix of third-party services.

Here’s What the Quantitative Model Suggests

Per our proven model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here as you will see below.

Earnings ESP: Cerner has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cerner carries a Zacks Rank #2.

Other Stocks to Consider

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

McKesson Corporation MCK has an Earnings ESP of +0.63% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom, Inc. DXCM has an Earnings ESP of +17.07% and a Zacks Rank #2.

Zimmer Biomet Holdings, Inc. (ZBH - Free Report) has an Earnings ESP of +0.38% and a Zacks Rank #3.

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